How Are PAN Card Numbers Made? Here's the Secret Behind Those 10 Alphanumeric Characters

The Income Tax Department of India issues a Permanent Account Number ( PAN ), a special 10-character identification number, to monitor financial activities and guarantee tax compliance. Here is a thorough explanation of its organization and the reasoning for each character:

PAN Card Number Structure

A PAN follows the format ABCDE1234F, where each character has specific significance:

1. First Three Characters (AAA–ZZZ)

• These are randomly produced alphabetic letters (like ABC or AFZ) that go from AAA to ZZZ. They act as a distinctive prefix to set PANs apart.

2. Fourth Character (Entity Type)

This letter denotes the type of PAN holder:

• P: Individual
• C: Company
• H: Hindu Undivided Family (HUF)
• F: Firm/Partnership
• A: Association of Persons (AOP)
• T: Trust
• B: Body of Individuals (BOI)
• G: Government Agency
• L: Local Authority
• J: Artificial Juridical Person.

Example: In PSRCY1234D, the fourth character C indicates a Company

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3. Fifth Character (Surname/Entity Initial)

• For individuals, this is the first letter of the holder’s surname/last name (e.g., K for "Kumar").
• For entities, it represents the first letter of the organization’s name
• These four digits (e.g., 1234) are a unique serial number ranging from 0001 to 9999
• The final character is an alphabetic checksum generated via a formula to validate the PAN’s authenticity.
• It prevents errors or fraud by verifying the preceding nine characters

4. Sixth to Ninth Characters (Sequential Numbers)

5. Tenth Character (Check Digit)

EXAMPLE

Consider the PAN AFZCK7190M:

• First three characters: AFZ (random alphabetic series).
• Fourth character: C (Company).
• Fifth character: M (Organisation’s name starts with "M").
• Next four digits: 7190 (serial number).
• Tenth character: K (checksum)

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Why Is It Necessary to Have a PAN?

All Indian taxpayers must have a Permanent Account Number (PAN). The Income Tax Department issues this unique 10-digit alphanumeric identification number, which is required for all formal correspondence with tax authorities, filing income tax returns, and paying the department.

Quoting PAN has also been mandatory on tax payment challans since January 1, 2005. In order to maintain openness and deter tax evasion, PAN must also be quoted in a number of high-value financial transactions. These consist of:

• Buying or selling motor vehicles (excluding two-wheelers)
• Opening bank or demat accounts
• Applying for credit/debit cards
• Large cash payments (over ₹50,000) to hotels, for foreign travel, or currency purchase
• Investments in mutual funds, bonds, debentures, and RBI-issued securities
• High-value cash deposits or purchases of bank drafts/pay orders
• Time deposits exceeding ₹50,000 (or ₹5 lakh in aggregate per financial year)
• Insurance premiums aggregating over ₹50,000 in a financial year
• Purchasing or selling securities, unlisted shares, or property above prescribed thresholds
• Any other goods/services purchased for over ₹2 lakh in a single transaction

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Apart from income tax filings and high-value financial transactions, every person, except the Central/State Government or Consular Offices is required to quote their PAN or Aadhaar number in documents related to the following transactions:

• Cash Deposits: If the aggregate amount of cash deposits in one or more accounts (with a bank, co-operative bank, or post office) reaches or exceeds ₹20 lakh in a financial year, PAN or Aadhaar must be quoted.
• Cash Withdrawals: Similarly, cash withdrawals totaling ₹20 lakh or more in a year across one or more accounts require quoting of PAN or Aadhaar.
• Opening Current or Cash Credit Accounts: PAN or Aadhaar is mandatory for opening a current account or cash credit account with banks, co-operative banks, or post offices.
  However, non-resident individuals and foreign companies are exempt from quoting PAN if:
• They have no taxable income in India,
• The transaction takes place within an IFSC banking unit, and
• They furnish a declaration in Form No. 60.

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Additional information should be Taken Care of

• Minors without taxable income can quote the PAN of their parent or guardian.
• Individuals who do not possess a PAN but undertake such transactions can submit Form No. 60 as an alternative.
• Non-residents are exempted from quoting PAN in certain transactions (e.g., those listed under points 3, 5, 6, 9, 11, 13, and 18 of earlier rules).

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LINKING PAN WITH AADHAR AND ITS IMPLICATIONS

Under Section 139AA of the Income-tax Act, 1961, it is mandatory for every person eligible to obtain Aadhaar to quote their Aadhaar number while applying for PAN or filing income tax returns, effective from July 1, 2017.

Initially, taxpayers without Aadhaar could quote the Aadhaar Enrolment ID, but from October 1, 2024, this option has been withdrawn. Now, only the actual Aadhaar number is accepted in PAN applications and income tax filings.

Additionally, individuals who were allotted PAN on or before July 1, 2017, and are eligible for Aadhaar must link their PAN with Aadhaar. If not linked by the notified deadline, the PAN becomes inoperative. The last extended date for linking was March 31, 2022. Post that, linking is still allowed upon payment of a fee under Section 234H, and the PAN becomes operative within 30 days from such intimation.

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Consequences of Inoperative PAN (Effective from 01.07.2023):

• Higher TDS as per Section 206AA
• Higher TCS as per Section 206CC
• No tax refund shall be issued
• No interest on delayed refund during the inoperative period

However, no higher deduction or collection is applicable for transactions up to 31.03.2024 if PAN is linked and becomes operative by 31.05.2024.

The Finance (No. 2) Act, 2019 introduced interchangeability of PAN and Aadhaar:

• If a person has not been allotted PAN but possesses Aadhaar, they may quote Aadhaar instead. The Income Tax Department will then issue a PAN.
• If a person already has a PAN and has linked it with Aadhaar, they may use Aadhaar in place of PAN in all transactions where quoting PAN is mandatory.

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